Jolly is on U.S. Highway 287 at the intersection of State Highway 240 and Farm Road 2393, on the Burlington Northern line ten miles northwest of Henrietta in western Clay County. It was established in 1890 as a shipping point on the Fort Worth and Denver City Railway. A post office began operations there in 1891 and was named for William H. Jolly, an area rancher and farmer. In 1895 Jolly had seventy-five residents, six businesses, two churches, and a school. From the mid-1920s through the mid-1960s it reported a population of sixty-three. Its post office ceased operations sometime after 1930. During the mid-1930s the community reported five businesses, dropping to two by the mid-1940s. The population of Jolly grew to seventy-five by the late 1970s and to 179 by 1988; the growth may be partially due to Jolly's proximity to Lake Arrowhead State Recreation Area. In 1990 the community's population was reported as 201. By 2000 the population was 188.